Robots in Retail: How RetailTech is Changing Russia's Future

Contents:

• The Impact of the Pandemic on the RetailTech Market: Transformation and New Opportunities
• RetailTech Trends: "Super Apps," Robotics, and Omnichannel
• Why IT Solutions Are Vital for Retail
• The Role of Artificial Intelligence in Cost Optimization for Retailers
• Why Computer Vision is Critical for Modern Retail?
• Future Technologies: Virtual Makeup Testing and Robotic Cleaners
• The Future of Retail: How Technologies Will Change the Market and Save Jobs places

The Impact of the Pandemic on the RetailTech Market: Transformation and New Opportunities

The COVID-19 pandemic has accelerated the digitalization process in Russian retail. According to McKinsey experts, over 50% of processes in this area can be automated, creating opportunities for innovation. Key areas of automation include inventory management, data processing, and customer support, allowing companies to streamline operations, increase efficiency, and improve customer service.

According to Skillbox Media, the Russian The RetailTech market is experiencing rapid growth, surpassing Europe but still lagging behind the United States. Boris Agatov, an expert in retail innovation, notes that Russia has seen significant progress in electronic payments, positioning the country as a leader in this field. Technological advancements and the implementation of new retail solutions are improving the user experience and increasing the efficiency of business processes, which in turn facilitates the further development of RetailTech in Russia. Our innovative express delivery models are unique and offer significant potential. In Russia, delivery can be completed in 10-15 minutes, a timeframe unmatched in the international market. Agatov emphasizes that Russian RetailTech is characterized by its diverse participants, unlike the dominance of large companies such as Amazon and Alibaba in Western and Chinese markets. This creates favorable conditions for the development of new technologies and services in the delivery sector, making the market more competitive and attractive to investors.

In 2020, the revenue of the twenty largest IT providers serving Russian retail grew by 42%, reaching almost 100 billion rubles, according to a report by CNews Analytics. For comparison, in 2012, spending on modern technologies in the retail industry was only 18 billion rubles. This growth underscores the significant attention Russian retailers are placing on implementing innovative technologies to improve business efficiency and enhance customer experience. Investments in IT solutions are becoming a key factor in ensuring competitiveness in a rapidly changing market.

According to Boris Agatov, the RetailTech market in Russia is highly diverse, but its exact size is difficult to determine. This sector encompasses both large solutions, such as SAP, and small startups that are developing thanks to grants. Currently, the market is overheated, and competition is reaching global standards. It's important to note that innovative technologies implemented in retail contribute to increased business efficiency and a better customer experience.

During the lockdown in the spring of 2020, many retailers were forced to increase their online sales. Dmitry Smirnov, Business Development Director at the IT company Croc, emphasized that the pandemic contributed to the increased demand for a reliable infrastructure with the scalability necessary to adapt to sudden changes in workloads. This shift in business emphasis underscores the importance of digitalization and flexibility in an unstable environment. Retailers that were able to quickly adapt and implement effective online solutions secured a competitive advantage in the market.

RetailTech Trends: "Super Apps," Robotics, and Omnichannel

With the rapid growth of online commerce, most retailers are experiencing significant changes. According to the press service of the M.Video - Eldorado group, the line between online and offline sales was previously clearly defined: an in-store purchase with payment at the checkout was considered retail, while an online order with delivery was considered an online sale. However, over time, this line has become increasingly blurred, and the pandemic has only accelerated this process. Retailers are forced to adapt to new conditions, integrating online and offline formats to meet consumer needs. It is important to understand that a successful sales strategy today requires flexibility and innovative approaches to remain competitive in the market. If you ordered headphones through a mobile app and picked them up in-store, how should this be classified – as an online or offline purchase? And what if you added several items to your cart, examined them in person, and paid through the app while in-store? These questions are relevant for M.Video - Eldorado and highlight changes in consumer habits. More and more shoppers are combining online and offline formats, necessitating a rethinking of traditional shopping categories. These changes require retailers to adapt to the new conditions and implement hybrid service models.

According to the company's data, approximately 85% of customers actively use both online and offline channels, and this figure continues to grow. A similar trend is observed at Magnit, which is also recording an increase in the number of multichannel shoppers. This indicates that modern consumers are seeking to combine various channels for a convenient shopping experience, underscoring the importance of a multichannel strategy for business.

Omnichannel is an important aspect of digital transformation in retail. It integrates all customer interaction channels into a single system, enabling a seamless transition between online and offline formats. A striking example of the omnichannel approach is the OneRetail mobile platform, developed by M.Video - Eldorado. This platform improves the customer experience by providing access to products and services both online and in-store, which helps increase sales and build customer loyalty.

OneRetail allows sellers to authorize customers when they enter the store, as well as analyze their profiles to offer the most relevant products. Thanks to this platform, customers participating in the system make purchases three times more often and spend more compared to those who don't use the solution. This demonstrates OneRetail's effectiveness in increasing sales and improving the customer experience.

Data analysis has long been focused on online platforms, but with the development of mobile platforms like OneRetail, retailers have gained the opportunity to effectively use data in traditional retail as well. Access to customer profiles and analysis of their purchasing behavior allows algorithms to accurately recommend popular products and accessories. This not only improves the customer experience but also contributes to increased sales by offering customers exactly what they need. Using modern technologies for data analysis is becoming an essential tool for optimizing business processes and increasing competitiveness in the market.

In 2020, the COVID-19 pandemic had a significant impact on the development of e-commerce, particularly in the area of ​​express delivery. Magnit notes that customers have become more demanding of delivery times, expecting their orders to be delivered the same day or even within a few hours. This trend highlights the importance of fast and reliable delivery for successful online stores, which in turn requires companies to optimize logistics processes and improve customer service. With consumer needs changing, businesses must adapt to these new realities to remain competitive in the e-commerce market. One of the key trends in RetailTech is "super apps." Since late 2020, Magnit has been actively developing a platform based on its loyalty program, which improves customer interaction and engagement. Similar initiatives are also being implemented at VkusVill, demonstrating growing interest in such solutions in the retail industry. Super apps integrate various functions, including shopping, loyalty programs, and additional services, making them convenient for users and helping to increase sales.

According to the VkusVill press service, the use of super apps helps predict customer preferences and create personalized offers. This is a key area for improving service quality and increasing customer satisfaction. Using modern technologies, companies can better understand the needs of their customers and offer them exactly those goods and services that meet their interests.

Why IT solutions are vital for retail

According to expert Boris Agatov, the retail sector is at the forefront of changes in consumer behavior, which makes it especially interested in the implementation of modern technologies. Agatov emphasizes that no other industry, be it manufacturers or financiers, has such an opportunity to quickly track consumer trends as retail chains. Rapid changes in consumer loyalty require retail to immediately respond to these changes. This dynamic makes the retail sector attractive for innovation and adaptation to new market realities, which, in turn, contributes to increased competitiveness.

In the Russian market, three main categories of retailers are shaping the innovation landscape. The first category includes major players such as X5 Group, Magnit, and Lenta, which are significantly ahead of their competitors and are setting the pace of digitalization in the industry. The second category consists of companies striving to implement IT solutions but facing a shortage of qualified specialists. The third group, unfortunately, remains passive, observing the ongoing changes without taking any action. These differences in approaches to innovation and digitalization highlight the importance of adapting to a rapidly changing market, which in turn impacts companies' competitiveness. Agatov emphasizes that large chains have already made significant strides in digitalization, covering just one kilometer, while smaller companies have only just begun their journey, covering just ten meters. However, for all organizations, regardless of size, there remains a long road to complete digital transformation. The RetailTech market faces certain challenges. IT solution providers often lack a clear understanding of consumer expectations, while retailers are not always able to interpret the technical jargon of IT specialists. However, given that the retail sector, having successfully weathered the pandemic, has received additional financial resources, it is safe to assume that investment in technology solutions will become a priority. It is important for both parties to establish effective communication, which will optimize processes and increase customer satisfaction.

The Role of Artificial Intelligence in Cost Optimization for Retailers

According to a study conducted in 2023, the use of artificial intelligence (AI) in retail significantly reduces operating costs. For example, Lenta began actively using AI in 2020 to forecast consumer demand. This solution allows for more accurate inventory planning, which reduces the risk of excess storage and loss. The implementation of AI increased forecasting speed by 1.5 times, according to Skillbox Media. The use of AI in retail not only optimizes processes but also improves business efficiency, making it an important tool for companies seeking a competitive advantage in the market.

Magnet is actively developing its technologies, having implemented a unified automated system for demand forecasting. This system, using modern artificial intelligence technologies, analyzes sales data in each store and optimizes supply processes. This results in a significant improvement in customer satisfaction, which is a key factor in the competitive retail environment.

Magnet actively uses artificial intelligence in its logistics processes. Machine learning-based systems optimize order distribution, routing, and vehicle and driver data monitoring. These innovative technologies can significantly reduce transportation costs by 15% and reduce accidents by 30-50%. This significantly improves the safety and efficiency of deliveries, a key aspect of modern business.

Ivan Melnik, Innovation Director at X5 Group, which manages the Pyaterochka and Perekrestok chains, emphasized that artificial intelligence (AI) is not just a technology, but a key tool for automating business processes. The implementation of AI significantly improves company efficiency, streamlining processes, reducing costs, and improving customer service. The use of AI in retail opens up new opportunities for data analysis and predicting customer preferences, which in turn contributes to increased competitiveness.

Ivan Melnik noted that demand forecasting using AI helps reduce the gap between the quantity of goods sold and purchased. The analysis process is automated, reducing the likelihood of errors and eliminating the influence of subjective factors. This leads to increased product availability for consumers and optimized inventory management.

Why is computer vision critical for modern retail?

In recent years, computer vision technologies have been actively implemented in Russian retail. One of the most notable examples is the use of facial recognition systems. A large company, X5 Group, has implemented self-service checkouts with biometric identification in 180 Perekrestok supermarkets, covering 25 regions of the country. This innovation allows customers to pay for purchases in just a few seconds, significantly speeding up the shopping process and increasing the overall level of convenience for customers. The implementation of such technologies not only improves the customer experience, but also contributes to the optimization of store operations.

The Lenta chain is testing a video product recognition system, which allows store employees to monitor product availability on shelves in real time, check that the display complies with the planogram, and that price tags are correctly placed. According to the company, this system has a 93% accuracy rate, making it one of the most effective in its category. This technology significantly improves inventory management and streamlines customer service processes, which in turn increases overall store efficiency.

The Lenta supermarket chain has introduced innovative smart scales capable of recognizing products by their appearance. Users simply place an item on the scale, select its name from a list, and print a price tag. These scales provide 92% recognition accuracy, significantly speeding up the checkout process, especially in the fresh fruit and vegetable departments. Magnit is also currently testing a similar technology, demonstrating the growing interest in automation and improving customer service in retail.

Computer vision is widely used in analyzing customer emotions. For example, the Magnit chain implemented a system at its checkout counters that classifies customer emotions into "Neutral," "Surprise," "Sadness," "Happiness," and "Anger." This solution effectively tracks customers' emotional states and adjusts store operations based on their mood. Using computer vision technologies to analyze emotions helps improve the customer experience and increase customer satisfaction.

Neural network technology is actively used during product tastings, allowing for the analysis of participants' reactions. This helps identify which dishes customers enjoy most. This approach not only improves the customer experience but also increases sales, as restaurants can adapt their menus based on the data collected. Using neural networks in gastronomy opens new horizons for businesses, allowing for a more accurate response to consumer preferences.

Russian retailers are actively implementing video queue recognition systems to effectively monitor customer congestion at checkout counters. These technologies send notifications to employees about the need to deploy additional cashiers, which is especially important during peak periods, such as the coronavirus pandemic. Implementing such solutions not only improves customer service but also optimizes store operations, reducing wait times and increasing customer satisfaction.

M.Video - Eldorado has implemented an innovative system that covers various shopping behavior scenarios, including "lone shoppers" and "waiting in line at the checkout." Using neural network analysis technologies, the system processes video streams from stores and automatically notifies employees about customers who linger at the shelves or require assistance from consultants. This solution is aimed at improving service quality and enhancing the shopping experience, allowing for faster response to customer needs.

Computer vision is considered one of the most promising areas in RetailTech, if implemented correctly. Experts such as Boris Agatov emphasize the importance of this approach. VkusVill also emphasizes the need for proper technology integration into business processes, which can significantly increase operational efficiency and improve the customer experience. Proper use of computer vision technologies can optimize processes, improve service levels and make a business more competitive.

Future Technologies: Virtual Makeup Testing and Robotic

Modern retailers are actively implementing innovative solutions using augmented reality (AR). Nielsen research shows that more than half of consumers (54%) are willing to use AR and VR technologies to evaluate products. Furthermore, 89% of respondents are willing to give up traditional shopping if they have access to devices that replace the experience of visiting a physical store. This demonstrates the growing interest in digital technologies in retail and the need for businesses to adapt to new consumer demands. The integration of AR and VR can significantly improve the user experience and increase sales, making these technologies important for the future of retail.

In 2019, Lamoda implemented innovative technologies by opening 16 virtual fitting rooms in central Moscow and launching an augmented reality (AR) feature for trying on sneakers in its mobile app. This solution allowed customers to evaluate the style and comfort of shoes remotely, without leaving home, significantly improving the user experience and increasing the convenience of online shopping.

Magnet has introduced an innovative virtual makeup testing technology called E-Visage. This interactive panel uses augmented reality to allow users to "try on" cosmetic products. Simply turn on the camera and select a product, such as lipstick or eyeshadow. E-Visage will apply the selected product to the image, allowing customers to see the result before purchasing. This technology significantly simplifies the cosmetics selection process and helps avoid disappointment, according to Skillbox Media.

In 2021, the Lenta chain of stores conducted an experiment with a cleaning robot, which demonstrated high efficiency in removing most stains. However, the robot encountered difficulty cleaning up spilled buckwheat, revealing the limitations of its functionality. As a result of this experiment, the robot was sent for further development to improve its cleaning capabilities.

According to independent expert Boris Agatov, automation of retail processes is one of the most promising areas for industry development. Given the shortage of couriers and cashiers, automation of these positions is becoming cost-effective and efficient. The implementation of automation technologies not only optimizes work processes but also improves customer service, reduces wait times, and increases overall business productivity. Effective use of automation in retail can be a key factor for successful competition in the market.

The Future of Retail: How Technology Will Change the Market and Save Jobs

The retail industry is undergoing significant changes thanks to the introduction of new technologies, such as robotics and self-service systems. According to Skillbox Media experts, these innovations can significantly improve the speed and quality of purchases, which in turn will improve the customer experience and increase the competitiveness of companies in the market. The implementation of such solutions optimizes processes, reduces service time, and makes shopping more convenient for customers. Retailers should pay attention to these trends to stay ahead of the competition and effectively adapt to new market conditions.

VkusVill is actively developing the concept of cashier-less stores, allowing customers to make purchases without the assistance of employees or self-checkouts. However, independent expert Boris Agatov expresses doubts about the sustainability of this format. He believes that this model may encounter difficulties related to security, customer service, and technical issues. It is important to consider the opinions of experts when implementing innovative solutions in retail.

A cashier-less store may seem like an attractive idea at first glance, but, as the expert notes, this solution has its drawbacks. Amazon initially intended to open three thousand such stores, but in the end, only a few dozen are operational. The reasons for this lie in both technological and psychological aspects. For customers, it is important to download a mobile app and complete registration, which creates additional complications and may discourage some customers. This approach requires taking into account user needs and more convenient solutions to increase the attractiveness of cashless stores.

Among the key areas in RetailTech, experts highlight technologies that significantly improve the efficiency of business processes. Particular attention is paid to interactive customer service and personalized shopping in offline retail. Equally important is the implementation of computer vision technologies, which help improve customer interaction and enhance service quality. These innovations not only optimize operations but also create a more comfortable and personalized atmosphere for customers.

Lenta is actively implementing innovative technologies to improve the customer experience. One key solution is the Set Galya chatbot, which allows you to remove items from a receipt without contacting a senior cashier. This solution significantly optimizes the process, saving approximately 60 working hours per month and speeding up request processing sixfold. The use of such technologies not only improves service but also increases the company's overall efficiency, making Lenta competitive in the retail market.

The Magnit chain is actively implementing digitalization, creating an ecosystem of complementary services and developing an omnichannel core. As part of its strategic initiative, the company is focusing on six key IT projects. These projects include the automation of transport logistics and the implementation of inventory forecasting systems, which improve operational efficiency and enhance customer service.

Boris Agatov emphasizes that with the growth of digitalization, the number of robots may exceed the number of workers, but he does not believe this will lead to mass layoffs. He argues that new technologies create additional jobs, even if machines are able to perform certain tasks more efficiently than humans. Therefore, technological advances do not necessarily mean job losses, but rather a transformation of the labor market and the emergence of new opportunities for employees.

Experts express concern about changes in the consumer economy. They believe that the shift to new, lower-paying positions could negatively impact the population's purchasing power. In a situation where robots are not involved in consumption, this could lead to economic stagnation. Agatov emphasizes the importance of this problem, pointing out potential risks for the economy in the future.